Natural gas spot prices soared 25-60 cents Monday in response to the National Hurricane Center’s (NHC) new route forecast for terrible Hurricane Ivan, which could make a grazing hit on eastern Gulf oil and gas projection facilities.

October futures prices rocketed higher in Access trading Sunday evening, leaving a 48-cent gap at the opening bell on Monday, but the October contract stepped back from its $5.08 high to end the Monday up 28 cents at $4.85.

Meanwhile, Gulf producers were rapidly mobilizing to get personnel off of platforms particularly in the eastern and central Gulf of Mexico. Significant production curtailments already were occurring on Monday. Shell alone reported that it could have up to 880 MMcf/d shut in by the end of the day from its Mars, Ram Powell, Ursa, West Delta 143, Cognac and Main Pass 252 platforms (see related story). It also expected to begin evacuating Central Gulf personnel and shutting in production there.

Pioneer reported 150 MMcf/d of shut ins. BP reported evacuating 2,300 people but said it would be operating platforms remotely for as long as possible. ExxonMobil, Anadarko, Nexen and many others were scrambling to prepare for what could be the worst storm to hit Gulf platforms since Andrew in 1992 (see NGI‘s stories on Andrew in the Features area on intelligencepress.com).

Earlier Monday afternoon, the Interior Department’s Minerals Management Service (MMS) reported that 14 companies had reported production shut-ins totaling 266 MMcf/d of gas and 99,529 bbl/d of oil. MMS said 54 platforms and 15 rigs already had been evacuated, but information was continuing to arrive and the preliminary data did not include reports from BP, Shell and ChevronTexaco.

Major gas pipelines also were just starting to report shut-ins on Monday. A spokeswoman for Williams said that Transcontinental Gas Pipe Line already had seen 100 MMcf/d of gas shut in Monday afternoon and Gulfstream Natural Gas was down 200 MMcf/d. Texas Eastern also said it was starting to experience supply declines, but did not yet have production shut-in statistics. Shut-ins were expected on all the major eastern and central Gulf Coast pipeline systems, which serve the Midwest, Northeast and Southeast regions.

If Ivan, a category five hurricane currently with 160 mph winds, is anything like Lili was in 2002 — a category four hurricane with 145 mph winds when it travelled through some offshore oil and gas infrastructure — Gulf production shut-ins could reach nearly 10 Bcf/d and last at least several days (total Gulf of Mexico production is about 12.3 Bcf/d, according to MMS).

But with some luck, damage may end up being minimal (see Daily GPI, Oct. 17, 2002; Oct. 8, 2002). In October 2002, Lili ran right up the center of the Gulf, making landfall on the Louisiana coast. However, only six platforms, out of 800 subjected to the full force of Hurricane Lili, sustained severe damage. At the time, MMS Director Johnnie Burton attributed the low amount of damage in part to stricter MMS standards for platform durability. The damage that was done involved several aged structures, some of which were more than 30 years old and had already been taken out of service.

Producers and gas buyers on Monday were hoping Ivan would become a lot less terrible. As of 5 p.m. EDT Monday, the storm was 30 miles south of the western tip of Cuba moving north-northeast at 9 mph. Hurricane force winds extended out 115 miles from the eye with tropical storm force winds extending 220 miles out. A coastal storm surge of 25 feet was expected, along with 12 inches of rain. The hurricane’s eye was forecast to curve into the middle of the Gulf of Mexico and then make a gradual turn toward the Northeast, eventually making landfall near Pensacola, FL, about 20 miles east of Mobile Bay, with hurricane force winds extending from New Orleans to Tallahassee.

But each route forecast has to be taken with a grain of salt. Last week, the NHC was expecting the hurricane to make landfall on the tip of the Florida peninsula at least 600 miles from its current projection. A lot can change in a few hours.

Sources on Monday reported that while gas prices moved sharply higher in response to Ivan, there were few actual buyers in the market supporting the increases. “Henry was trading well over Nymex, but the weird thing is I seem to be having a lot of problems finding buyers,” said a Gulf Coast marketer. “It’s all Ivan-related. Prices were up everywhere today, but Henry Hub was the strongest in the Gulf that I saw. It had been trading 8-10 cents under Nymex, but right now it’s about a dime over and had been 20 cents over earlier today.”

He said that anyone with extra gas in production area storage was out selling it Monday, trying to take advantage of the price spike. “If you have gas in storage, heck, it’s a sell right now because when are you going to get premiums like this. You figure you can put it in later if you need to and probably at a cheaper price.

“Everybody that called today was trying to sell me gas,” he said. “They figure that after the hurricane is done everything will settle down and the spreads will back out and they can buy their gas back and still take advantage of the winter strip.”

A Northeastern local distribution company buyer said he would not be looking for gas for a least a couple days. “We’re in pretty good shape in storage. If we get a couple days where the prices run up, we can back off on our buying. We’re expecting everything to come back down after the hurricane. That is unless there’s damage.

“If there is damage, we may be into a different paradigm; it may be a week or longer of higher prices. But we can afford to not buy for a few days. We may have to shift our buying away from the Gulf to the market area and to import points.”

Northeastern prices shot 45-60 cents higher Monday. “Non New York over the weekend was $5.01 and today we sold some for $5.47,” the LDC source said. “Niagara over the weekend was $4.79 and today it was $5.30. But markets were pretty light. We couldn’t sell some of our gas on Transco today. We tried sell it and then we looked for markets off of Tennessee in the market area and there were no markets there either.”

Canadian producers had a solid sell at Chicago, but bringing gas up from the Midcontinent or the Gulf was more of a challenge because of the timing of the price increases. “Henry was so strong, and then when Henry gave up, Chicago disappeared and then it squeezed everybody short at the end and traded 15 cents above the hub,” said an Alberta producer. “If you came from the South early on you probably had trouble flowing to Chicago and may have ended up stranding transport. At the end of the day, they could have flowed it. October Chicago didn’t trade at all. It’s probably one over right now,” he said.

Western cash points experienced price increases of 20-30 cents on average Monday. Southern California Border saw the largest jump with spikes of more than 35 cents to the $4.80s. PG&E Citygate was up nearly 30 cents to just over $5.

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